Duniatex, a group of Indonesian textile manufacturing companies, has been missing payments on its debts as cheap imported textiles continue to flood the country. (Photo courtesy of Duniatex)

Duniatex Considers Conversion to Resolve $1.5b Debt Problem


OCTOBER 14, 2019

Jakarta. Duniatex, a group of Indonesian textile manufacturing companies, is considering debt conversion as an option to restructure a debt of $1.51 billion, its financial advisor said on Sunday. 

The group missed its interest and coupon payments last quarter, an event that observers say reflects the fact that the Indonesian textile industry has been struggling in the past three years to cope with a flood of cheap textile imports from China, South Korea, Thailand and Vietnam. 

Six of Duniatex's subsidiaries received provisional relief from potential bankruptcy from the South New York Commercial Court in the United States after filing for protection under Chapter 15 of the US Bankruptcy Law. 

According to the chapter, a US bankruptcy court can administer assets or take actions on behalf of US-based creditors while the debtor is facing bankruptcy in another country.  

"We submitted the request voluntarily. The first hearing was on Oct. 11 when we [the Duniatex group] received provisional relief," said Fransiscus Alip, the director of AJ Capital Advisory, Duniatex's financial advisor.

The Duniatex companies that received the provisional relief were Delta Merlin Dunia Textile, Delta Dunia Textile, Delta Merlin Sandang Textile, Delta Dunia Sandang Textile, Delta Setia Sandang Asli Tekstil and Perusahaan Dagang dan Perindustrian Damai (Damaitex).

Delta Merlin is facing a bankruptcy lawsuit after Singapore-based Shine Golden Bridge – who holds Delta Merlin's unsecured $300 bonds – filed for a debt obligation delay, locally known as PKPU, in a court in Semarang, Central Java. 

Alip said Duniatex is open to inputs from creditors regarding its debt restructuring scheme, which may range from debt tenor extension to share conversion.

"If they chose share conversion, Duniatex must start thinking about an initial public offering. Their shares will become the property of creditors," Alip said. 

He expected Duniatex's debt restructuring process could be completed in five months.

Duniatex has racked up a debt of $1.51 billion by August, 82 percent of which is already past its payment date. 

More than $948 million of the debts are owed to Indonesian creditors, and the remaining $562 million to foreign ones.

A total of 48 banks provided loans for Duniatex, 22 of them to more than one company in the group.  

Duniatex's domestic creditors include Indonesia Eximbank, Nobu Bank, Rabobank, Panin Syariah, BRI Syariah, Central Java BPD, Bank Mandiri, Bank Mualamat, BNI Syariah and BPD Banten, according to a report by Debtwire.

Alip said the Duniatex companies' cash flow still allows them to run their operations and avoid any termination of employment.

Indonesia's textile industry has struggled in the past three years as domestic consumers grew more cautious with their purchase at a time when cheaper imports have been flooding the country.

The Central Statistics Agency's data showed imports of textile fabrics rose to 414,000 tons last year, up 74 percent since 2016.